If Society has both charitable and religious objects, registration u/s 12AA can not be denied by invoking provisions of section 13(1)(b) – High Court
In a recent judgment, Hon’ble Chhattisgarh High Court upheld the order of the ITAT that when the Society has both charitable as well as religious objects, registration u/s 12AA can not be denied by invoking provisions of section 13(1)(b) on the ground that trust was established for a particular community.
ABCAUS Case Law Citation:
4327 (2024) (11) abcaus.in HC Chhattisgarh
In the instant case, the Revenue had challenged the legality, validity and correctness of judgment & order passed by the ITAT directing the Income Tax Department to the respondent society registration under Section 12AA of the Income Tax Act, 1961 (the Act).
The question raised by the Revenue was as to whether the ITAT was justified in holding that when assessee Trust has objects which are both Charitable and religious in nature the section 13(1)(b) is not applicable which is contrary to the Hon’ble Supreme Court finding that section 13(1)(b) of the Act applies to charitable Trusts as well as to charitable cum religious Trusts.
The CIT(E) had found the respondent society was formed for a particular community. On appeal, the ITAT allowed the appeal holding that on perusal of the bye-laws of the assessee Society, it was quite evident that the assessee Society had charitable as well as religious objects, therefore, the assessee is entitled for registration under Section 12AA of the Act.
The Revenue contended that ITAT was absolutely unjustified in granting the application for registration of the assessee Society under Section 12AA of the Act. It was further submitted that the assessee Society was established for a particular community and almost all the objects of the assessee Society were for the benefit of a particular community and the assessee Society carried out activities for the benefit of the said community only.
The Hon’ble High Court observed that a careful perusal of the provisions, makes it clear that at the time of granting registration what the Commissioner of Income Tax (Exemption) is required to look into mainly, is the object of the trust; whether the trust has applied for registration under Section 12AA with proper details as enshrined in the said Act and whether the prescribed format for application as in the said Act has been complied with and to conduct an enquiry to satisfy himself of the genuineness of activities and the objects of the trust and upon reaching satisfaction of the objects and the authenticity of the activities of the trust, he would grant the registration.
The Hon’ble High Court observed that the Revenue had relied upon a judgment of the Hon’ble Supreme Court in which their Lordships qua Section 12AA of the Act observed that “section 13 enlists the circumstances wherein the exemption would not be available to a religious or charitable trust otherwise falling under Sections 11 or 12 and therefore, requires to be read in conjunction with the provisions of Sections 11 and 12 towards determination of eligibility of a trust to claim exemption under the aforesaid provisions.”
The Hon’ble High Court further observed that the Gujarat High Court held that the provisions of Section 13(1)(b) will apply only to the Trusts which are purely charitable purposes. If the Assessee Trust has both charitable and religious objects, the provisions of Section 13(1)(b) of the Act would not apply.
Further it was noted that Rajasthan High Court had also specifically held that at the time of granting registration, the objects of the Trust for which it was formed is only to be looked into and the satisfaction of the Commissioner of Income-Tax about genuineness of activities of the Trust was not criteria as the Trust was just commencing activities and therefore the issue regarding satisfaction or genuineness of the activities of the Trust is not a matter to be looked into at the time of granting registration under Section 12AA of the Act.
The Hon’ble High Court noted that in the instant case, the ITAT relying upon the decision of the Gujarat High Court and considering the bye-laws of the assessee Society had clearly held that the assessee Society had charitable as well as religious objects, therefore, entitled for registration under Section 12AA of the Act. The said finding is a simple finding of fact based on the evidence available on record, it was neither perverse nor contrary to the record as also the law. Considering the finding recorded by the ITAT and the evidence available on record, the respondent assessee Society had both charitable as well as religious objects.
It was held by the Hon’ble High Court that the ITAT was absolutely justified in holding that the assessee Society was entitled for registration under Section 12AA of the Act.
Accordingly, the substantial questions of law was answered in favour of the assessee and against the Revenue and the appeal was dismissed.
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